Sunday, December 29, 2013

The battle over net metering between Colorado's Xcel Energy and rooftop solar advocates could make the recent impassioned debate in Arizona seem tame.

Xcel Energy, Colorado's dominant electricity provider, will have its 2014 Renewable Energy Standard Compliance Plan reviewed by the state Public Utilities Commission in February.

In its filings, the utility proposed to change net energy metering (NEM) to a "net metering incentive." To validate the request, Xcel filed a value of solar study that puzzled Colorado solar advocates.

"They presented a draft study to the stakeholder review committee, asked for feedback, and then just filed it with the PUC with no discussion," said Rick Gilliam, Vote Solar Initiative Research Director. "Xcel said they want a conversation about solar, but they won't return phone calls."

"There are two main arguments," according to Meghan Nutting, SolarCity Policy Director. "One is that Xcel wants to recover infrastructure costs from the Renewable Energy Standard Adjustment fund." Xcel's net metering incentive is the difference between what the study concluded are distributed solar's cost and benefits, Gilliam explained. "They want to deduct that from the RESA fund."

In Xcel's formulation, taking the net metering incentive from the RESA fund would make it as "transparent" as other performance-based incentives, Xcel VP Karen Hyde testified to the PUC in July.

"But it is questionable whether that is legal," Gilliam said. "State law says RESA is to incur costs for implementing the RES."

Xcel's concern is a cross-subsidy, according to Robin Kittel, Xcel's Director of Regulatory Administration. With NEM, solar owners can sharply reduce their electricity bills and avoid much of the prorated Electric Commodity Adjustment (ECA) bill charge. This shifts system costs to non-solar-owners.

This makes it transparent that "every solar customer continues to receive benefits from the utility system that are the same or greater than the benefits received by his or her non-solar neighbor," Hyde testified.

"It would be different in Colorado because, overall, the average customer use there is higher," Gilliam acknowledged. Sunrun reports its average Colorado customer pays more than $20 per month to Xcel.

Of Xcel's 16,000 Colorado solar owners, 1,700 received checks for producing more electricity than they consumed, Kittel said, and the "average residential solar customer serves 90 percent of load" with onsite production.

"The other argument," Nutting said, "is that the 2014 Compliance Plan should only apply to 2014 and renewables, but this decision will impact future compliance plans, integrated renewables planning and what other utilities in the state do."

"Cost-benefit studies are complicated," Gilliam added. "To try to go over those details in a litigated process is a poor way to get a reasonable outcome."

"The present NEM incentive was implemented as part of the RES legislation. It is appropriate to bring it to this proceeding," Kittel said. "It only applies to 2014, but we are asking the Commission to be aware of the cross-subsidy, because Colorado solar advocates have a 1-million-solar-roofs target."

Motions by solar groups to remove the current debate from Compliance Plan proceedings were rejected.

Xcel's study, which Nutting called "unvetted," applied an "avoided costs" method. It concluded that the revenue lost to net metering is the retail rate of $0.104 per kilowatt-hour, according to Kittel. The system's avoided cost, or benefit, is $0.046 per kilowatt-hour. Xcel wants the $0.058 per kilowatt-hour difference shifted from the RESA fund to Xcel's ECA account to compensate for revenues lost to solar owners.

The solar industry critique of the study identified specific aspects of distributed solar's benefit that were either undervalued or not considered by Xcel's study. As a result, the critique concluded, "the annual net benefits of solar DG on the [Xcel] system are $13.6 million per year."

"The other alternative is we end up in a fight," Gilliam said. And this could be the first in a series of moves by Xcel, he added. The next would be a rate change request based on the lower cost valuation. And if Xcel is compensated from the RESA fund, it would effectively cap NEM at the RESA fund's 2 percent of utility bills cap. Finally, Xcel would, as Hyde's testimony acknowledged, pursue a legislative change to NEM.

After proposed NEM rollbacks failed in Arizona and other states, Gilliam said, Xcel seems to have "decided to try something more subtle and creative." A confrontation at the PUC is nearing, he warned. "The only way to stop it now would be a settlement. But I have made offers to Xcel and there has been no substantive response."

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Wednesday, December 25, 2013

This really does a good job of explaining why fantasies of big highway projects like 3rd Bridge in Salem are so dangerous, wiping out capital reserves we will desperately need for adaptation.

The article:

There is a lot of confusion about which limit we are reaching with respect to oil supply. There seems to be a huge amount of "reserves," and oil production seems to be increasing right now, so people can't imagine that there might be a near term problem. There are at least three different views regarding the nature of the limit:

Climate Change. There is no limit on oil production within the foreseeable future. Oil prices can be expected to keep rising. With higher prices, alternative fuels and higher cost extraction techniques will become available. The main concern is climate change. The only reason that oil production would drop is because we have found a way to use less oil because of climate change concerns, and choose not to extract oil that seems to be available.

Limit Based on Geology ("Peak Oil"). In each oil field, production tends to rise for a time and then fall. Therefore, in total, world oil production will most likely begin to fall at some point, because of technological limits on extraction. In fact, this limit seems quite close at hand. High oil prices may play a role as well.

Oil Prices Don't Rise High Enough. We need high oil prices to keep oil extraction up, but as we reach diminishing returns with respect to oil extraction, oil prices don't rise high enough to keep extraction at the required level. If oil prices do rise very high, there are feedback loops that lead to more recession and job layoffs and less "demand for oil" (really, oil affordability) among potential purchasers of oil. One major cut-off on oil supply is inadequate funds for reinvestment, because of low oil prices.

Why "Oil Prices Don't Rise High Enough" Is the Real Limit

In my view, our real concern should be the third item above, "Oil Prices Don't Rise High Enough." The problem is caused by a mismatch between wages (which are not growing very quickly) and the cost of oil extraction (which is growing quickly). If oil prices rose as fast as extraction costs, they would leave workers with a smaller and smaller percentage of their wages to spend on food, clothing, and other necessities–something that doesn't work for very long. Let me explain what happens.

Because of diminishing returns, the cost of oil extraction keeps rising. It is hard for oil prices to increase enough to provide an adequate profit for producers, because if they did, workers would get poorer and poorer. In fact, oil prices already seem to be too low. In years past, oil companies found that the price they sold oil for was sufficient (a) to cover the complete costs of extraction, (b) to pay dividends to stockholders, (c) to pay required governmental taxes, and (d) to provide enough funds for investment in new wells, in order to keep production level, or even increase it. Now, because of the rapidly rising cost of new extraction, oil companies are finding that they are coming up short in this process.

Oil companies have begun returning money to stockholders in increased dividends, rather than investing in projects which are likely to be unprofitable at current oil prices. See Oil companies rein in spending to save cash for dividends. If our need for investment dollars is escalating because of diminishing returns in oil extraction, but oil companies are reining in spending for investments because they don't think they can make an adequate return at current oil prices, this does not bode well for future oil extraction.

A related problem is debt limits for oil companies. If cash flow does not provide sufficient funds for investment, increased debt can be used to make up the difference. The problem is that credit limits are soon reached, leading to a need to cut back on new projects. This is particularly a concern where high cost investment is concerned, such as oil from shale formations. A rise in interest rates would also be a problem, because it would raise costs, leading to a higher required oil price for profitability. The debt problem affects high priced oil investments in other countries as well. OGX, the second largest oil company in Brazil, recently filed for bankruptcy, after it ran up too much debt.

National oil companies don't explain that they are finding it hard to generate enough cash flow for further investment. They also don't explain that they are having a hard time finding sites to drill that will be profitable at current prices. Instead, we are seeing more countries with national oil companies looking for outside investors, including Brazil and Mexico. Brazil received only one bid, and that for the minimum amount, indicating that oil companies making the bids do not have high confidence that investment will be profitable, either. Meanwhile, newspapers spin the story in a totally misleading way, such as, Mexico Gears Up for an Oil Boom of Its Own.

"We are not dealing with an era of scarcity, we are dealing with a situation of abundance," Ken Cohen, Exxon's vice president of public and government affairs, said in an interview. "We need to rethink the regulatory scheme and the statutory scheme on the books."

Cohen could explain that without natural gas exports, there is no way the natural gas price will rise high enough for Exxon-Mobil to extract the resource at a profit. Without exports, Exxon Mobil will lose money on the extraction, or more likely, will have to leave the natural gas in the ground. With low prices, the huge resource that Obama has talked about is simply a myth–the prices need to be higher. Of course, no one tells us the real story–it seems better to let people think that the issue is too much natural gas, not that it can't be extracted at the current price. The stories offered to the news media are simply ways to convince us that exports make sense. Readers are not aware how much stories can be "spun" to make the current situation sound quite different from what it really is.

What Goes Wrong with "Climate Change" and "Limit Based on Geology" Views

The Illusion of Reserves. Oil and gas reserves may seem to be "be there," but a lot of conditions need to be in place for them to actually be extracted. Clearly, the price needs to be high enough, both for current extraction and to fund new investment. Other conditions need to be in place as well: Debt needs to be available, and it needs to be available at a sufficiently low rate of interest to keep costs down. There needs to be political stability in the country in question. Something as simple as a continuation of the uprisings associated with the Arab Spring of 2010 could lead to the inability to extract reserves that seem to be present. Other requirements include availability of water for fracking and the availability of skilled workers and drilling rigs.

In the past, we have been far enough away from limits that issues such as these have not been a big problem. But as we get closer to limits and stretch our capabilities, these become more of a problem. Right now, availability of debt at low interest rates is a particularly important issue, as is the need for adequate oil company profitability–things that are easy to overlook.

Wrong Economic Views Leading to Wrong Oil Views. Economists have put together economic models based on a world without limits. A world without limits is the easy approach, because mathematical relationships are much simpler in a world without limits: a relationship which held in 1800 is expected to hold in 1970 or in 2050. A world without limits never offends politicians, because growth always seems to be possible, meaning a never-ending supply of jobs and of goods and services for constituents. A model without limits produces the simple relationships that we are accustomed to, such as "Inadequate supply will lead to a rise in price, and this in turn will tend to create greater supply or substitutes." Unfortunately, these models omit many important variables and thus are inadequate representations of the world we live in today.

In a world with limits, there are feedback loops that cause high oil prices to lead to lower wages and more unemployment in oil importing countries. Thus "demand" can't keep rising, because workers can't afford the higher oil prices. Oil prices stagnate at a level that is too low to maintain adequate investment. High oil prices also feed back into slower economic growth and a need for ultra-low interest rates to raise demand for high-priced goods such as cars and homes.

When prices remain in the $100 barrel range, they are still high enough to damage the economy. Businesses are not much damaged, because they have ways they can work around higher oil prices, especially if interest rates are low. Most of the ways businesses can work around high oil prices involve reducing wages to US workers–for example, outsourcing production to a lower cost country, or cutting the pay of workers, or laying off workers to match lower demand for goods. (Lower demand for goods tends to occur when oil prices rise, and businesses raise their prices to reflect the higher oil costs.)

Workers are still affected by costs in the $100 barrel range, and so are governments. Governments must pay out higher benefits than in the past, to keep the economy afloat. They must also keep interest rates very low, to try to keep demand for homes and cars as high as possible. The situation becomes very unstable, however, because very low interest rates depend on Quantitative Easing, and it does not appear to be possible to continue Quantitative Easing forever. Thus, interest rates will need to rise. Such a rise in interest rates is likely to push the country back into recession, because taxes will need to be higher (to cover the government's higher debt costs) and because monthly payments on homes and new car purchases will tend to rise. The limit on oil production then becomes something very remote from geology–something like, "How long can interest rates remain low?" or "How long can we make our current economy function?"

The Interconnected Nature of the Economy. In my last post, I talked about the economy being a complex adaptive system. It is built from many parts (many businesses, laws, consumers, traditions, built infrastructure). It can operate within a range of conditions, but beyond that range it is subject to collapse. An ecosystem is a complex adaptive system. So is a human being, or any other kind of animal. Animals die when their complex adaptive system moves out of its range.

It is this interconnectedness of the economy that leads to the strange situation where something very remote from the real problem (oil limits) can lead to a collapse. Thus, it can be a rise in interest rates or a political collapse that ultimately brings the system down. The path of the downslope can be very different from what a person might expect, based on the naive view that the problems will simply relate to reduced supply of oil.

A Case Study of the Collapse of the Former Soviet Union

The Soviet Union was major oil exporter and a military rival of the United States in the 1950s through 1980s. It also was the center of a huge economic system, involving many other countries. One thing that bound the countries together was the use of communism as its method of government; another was trade among countries. In effect, the group of communist countries had their own complex adaptive system. Things seemed to go fine for many years, but then in December 1991, the central government of the Soviet Union was dissolved, leaving the individual republics that made up the Former Soviet Union (FSU) on their own.

While there are many theories as to what all caused the collapse, it seems to me that low prices of oil played a major role. The reason why low oil prices are important is because in an oil exporting country, such as the FSU, oil export revenues represent a major part of government funding. If oil prices drop too low, there is a double problem: (1) it becomes unprofitable to drill new wells, so production drops and, (2) the revenue that is collected on existing wells drops too low. The problem is then a huge financial problem–not too different from the financial problem the US and many of the big oil importing countries are experiencing today.

Figure 1. Oil production and price of the Former Soviet Union, based on BP Statistical Review of World Energy 2013.

In this particular situation, oil prices (in inflation adjusted prices) hit a peak in 1980. Once oil prices hit a peak, FSU oil production very much flattened. There was a continued small rise until 1983, but without the very high prices available until 1980, aggressive investment in new oil extraction dropped back.

Not only did FSU oil production flatten, but FSU oil consumption also flattened, not long after oil production stopped rising (Figure 2). This flattening helped maintain exports and the taxes that could be collected on these exports.

Figure 2. Former Soviet Union Oil Production and Consumption, based on BP Statistical Review of World Energy, 2013.

Even though total exports were close to flat in the 1980s (difference between consumption and production), there were some countries where exports that were rising–for example North Korea, shown in Figure 4. This mean that oil exports for some allies needed to be cut back as early as 1981. Figure 3 shows the trend in oil consumption for some of FSU's allies.

Figure 3. Oil consumption as a percentage of 1980 consumption for Hungary, Romania, and Bulgaria, based on EIA data.

A person can see that oil consumption dropped off slowly at first, and increased around 1990. All of these countries saw their oil consumption drop by at least 40% by 2000. Bulgaria saw is oil consumption drop by 65% to 70%.

The FSU exported oil to other countries as well. Two countries that we often hear about, Cuba and North Korea, were not affected in the 1980s (Figure 4). In fact, Cuba's oil consumption never seems to have been severely affected. (It is possible that exports of manufactured goods from the FSU dropped, however.) Cuba's drop-off in oil consumption since 2005 may be price-related.

Figure 4. Oil consumption as a percentage of 1980 oil consumption for Cuba and North Korea, based on EIA data.

North Korea's oil consumption continued growing until 1991. Its drop-off was then very severe–a total of an 83% reduction between 1991 and 2010. In most of the countries where oil consumption dropped, consumption of other fossil fuels dropped as well, but generally not by as large percentages. North Korea experienced nearly a 50% drop in other fuel (mostly coal) consumption by 1998, but this has since somewhat reversed.

By 1991, the FSU was in poor financial condition, partly because of the low oil prices, and partly because its oil exports had started dropping. FSU's oil production left its plateau and started dropping about 1988 (Figure 2). The actual drop in FSU oil production meant that oil consumption for the FSU needed to drop as well–a big problem because industry depended upon this oil. The break-up of the FSU was a solution to these problems because (1) it eliminated the cost of the extra layer of government and (2) it made it easier to shift oil consumption among the member republics, so that those republics that produced more oil could keep it for their own use, rather than sending it to republics which did not produce oil. This shortchanged non-oil producing republics, such as the Ukraine and Belarus.

If we look at oil consumption for a few of the republics that were previously part of the FSU, we see that oil consumption was fairly flat, then dropped off quickly, after 1991.

Figure 5. Oil consumption as a percentage of 1985 oil production for Russia, the Ukraine, and Belarus, based on BP Statistical Review of World Energy 2013.

By 1996 (only 5 years after 1991), oil consumption had dropped by 78% for the Ukraine, by 61% for Belarus, and by "only" 47% for Russia, which is an oil-producing state. At least part of the reason for the fast drop off was the fact that in the years immediately after 1991, oil production for the FSU dropped by about 10% per year, necessitating a quick drop off in consumption, especially if the country was to continue to make some money from exports. The 10% drop-off in oil production suggests that the decline in oil production was more than would be expected from geological decline alone. If the decline were for geological reasons only, without new drilling, one might the expect the drop off to be in the 4% to 6% range.

When oil consumption dropped greatly, population tended to decline (Figure 6). The decline started earliest in the countries where the oil consumption drop was earliest (Hungary, Romania, and Bulgaria). The steepest drop-offs in population occur in the Ukraine and Bulgaria–the countries with the largest percentage drops in oil consumption.

Figure 6. Population as percent of 1985 population, for selected countries, based on EIA data.

Some of the population drop is from emigration. Some of it is from poorer health conditions. For example, Russia used to provide potable water for its citizens, but it no longer does. Some is from conditions such as alcoholism. I haven't shown the population change for North Korea. It actually continued to increase, but at a much lower rate of growth than previously. Cuba's population has begun to fall since 2005.

GDP growth for the countries shown has tended to lag behind world economic growth (Figure 7).

Nearly all of the countries listed above have had financial problems, at different times.

Belarus's GDP seems to be doing better than the rest on Figure 7. Belarus, like the Ukraine, is a pipeline transit country for Russia. In Belarus, natural gas consumption has increased, even as oil consumption has decreased. This increase is likely helping the country industrialize. Inflation occurred at the rate of 51.9% in 2012 according to the CIA World Fact Book. This high inflation rate may be distorting indications.

Conclusion

We can't know exactly what path our economy will follow in the future. I expect, though, that the path of the FSU and its trading partners is closer to the path we will be following than most forecasts we hear today. Most of us haven't followed the FSU story closely, because we wrote off most of their problems to deficiencies of communism, without realizing that there was a major oil component as well.

The FSU situation may, in fact, be better that what the Industrialized West is facing in the next few years. The FSU had the rest of the world to support it, offering investment capital and new models for development. Oil production for Russia was able to rebound when oil prices rose again in the early 2000s. As situations around the world decline, it will be harder to "bootstrap."

One of the things that hampered the recovery of the FSU was the fact that the communist economic model proved not to be competitive with the capitalistic model. In a way, the situation we are facing today is not all that different, except that our challenge this time is competition from Asian economies that we have not had to compete with until the early 2000s.

Asian economies have several cost advantages relative to the Industrialized West:

(1) Asian competitor countries are generally warmer than the industrialized West. Because of this, Asian workers can live more comfortably in flimsy homes. They also don't need much salary to cover heating and can more easily commute by bicycle. It is often possible to produce two crops a year, making productivity of land and of farmers higher than it otherwise would be. In other words, Asian competitor countries have an energy subsidy from the sun that the Industrialized West does not.

(2) Asian competitors are often willing to ignore pollution problems, reducing their costs relative to the West.

(3) Asian competitors generally depend on coal to a greater extent than we do, keeping their costs down, relative to countries that use higher-priced fuels.

(4) Asian competitors are less generous with employee benefits such as health care and pensions, also holding costs down.

Economists, through their wholehearted endorsement of globalization, have pushed industrialized countries into a competitive situation which we are certain to lose. While oil prices tend to push wages down, competition with Asian countries makes the downward push on wages even greater. These lower wages are part of what are pushing us toward collapse.

To solve our problems, economists have proposed a shift toward renewable energy and the implementation of carbon taxes. Unless these changes are done in a way that actually reduces costs, these "solutions" are likely to make us even less competitive with low-cost competitors such as those in Asia. Thus, they are likely to push us toward collapse more quickly.

To support this position, economists point to climate change models based on the view that the burning of fossil fuels will increase greatly in the decades again. In fact, if collapse occurs in the next few years in the Industrialized West, carbon emissions are likely to fall quickly. Because of the interconnectedness of the world system, the rest of the world will likely also encounter collapse in not many more years, and their carbon emissions are likely to fall quickly, as well. Even the "Peak Oil" emissions that are used in climate change models are way too high, relative to what seems likely to be the case.

If I am right about collapse being a possibility for the Industrialized West, then our problem will be that we as nations become so poor that we can no longer find goods to trade with Asian countries. Most of our goods will not be competitive as exports, and we won't be able to simply add more debt to rectify the situation. Thus, we will become unable to buy many goods we depend on, including computers and replacement parts for wind turbines.

Breakups of many types are possible. The European Union may cease to operate in the way it does today. The International Monetary Fund is likely to cease operating in the way it does today, because of the collapse of many of its members who provide funding. The US will be subject to strains of the type that lead to break up. If nothing else, oil producing states will want to withdraw, so that they are not, in effect, subsidizing the rest of the US economy.

It is unfortunate that economists are tied to their hopelessly out-of-date economic models. Part of the problem is that the story of "collapse around the corner" doesn't sell well. The alternate story economists have come up with really isn't right, but it is pleasing to the many who benefit from subsidies for renewables, and it makes politicians look like they are doing something. The specter of climate change in the distance gives an excuse to cut back oil use, among other things, so has at least some theoretical benefit.

It is unfortunate, however, that we cannot look at the real problem. Unless we can understand the problem as it really is, it is impossible to find solutions that might actually be helpful.

A former British Petroleum (BP) geologist has warned that the age of cheap oil is long gone, bringing with it the danger of "continuous recession" and increased risk of conflict and hunger.

At a lecture on 'Geohazards' earlier this month as part of the postgraduate Natural Hazards for Insurers course at University College London (UCL), Dr. Richard G. Miller, who worked for BP from 1985 before retiring in 2008, said that official data from the International Energy Agency (IEA), US Energy Information Administration (EIA), International Monetary Fund (IMF), among other sources, showed that conventional oil had most likely peaked around 2008.

Dr. Miller critiqued the official industry line that global reserves will last 53 years at current rates of consumption, pointing out that "peaking is the result of declining production rates, not declining reserves." Despite new discoveries and increasing reliance on unconventional oil and gas, 37 countries are already post-peak, and global oil production is declining at about 4.1% per year, or 3.5 million barrels a day (b/d) per year:

"We need new production equal to a new Saudi Arabia every 3 to 4 years to maintain and grow supply... New discoveries have not matched consumption since 1986. We are drawing down on our reserves, even though reserves are apparently climbing every year. Reserves are growing due to better technology in old fields, raising the amount we can recover – but production is still falling at 4.1% p.a. [per annum]."

Dr. Miller, who prepared annual in-house projections of future oil supply for BP from 2000 to 2007, refers to this as the "ATM problem" – "more money, but still limited daily withdrawal " As a consequence: "Production of conventional liquid oil has been flat since 2008. Growth in liquid supply since then has been largely of natural gas liquids [NGL]- ethane, propane, butane, pentane - and oil-sand bitumen."

at the University of Sussex in Brighton, they argue that among oil industry experts "there is a growing consensus that the era of cheap oil has passed and that we are entering a new and very different phase." They endorse the conservative conclusions of an extensive earlier study by the government-funded UK

In fact, increasing dependence on shale could worsen decline rates in the long run:

"Greater reliance upon tight oil resources produced using hydraulic fracturing will exacerbate any rising trend in global average decline rates, since these wells have no plateau and decline extremely fast - for example, by 90% or more in the first 5 years."

Tar sands will fare similarly, they conclude, noting that "the Canadian

"Crude oil production grew at approximately 1.5% per year between 1995 and 2005, but then plateaued with more recent increases in liquids supply largely deriving from NGLs, oil sands and tight oil. These trends are expected to continue... Crude oil production is heavily concentrated in a small number of countries and a small number of giant fields, with approximately 100 fields producing one half of global supply, 25 producing one quarter and a single field (Ghawar in Saudi Arabia) producing approximately 7%. Most of these giant fields are relatively old, many are well past their peak of production, most of the rest seem likely to enter decline within the next decade or so and few new giant fields are expected to be found."

"The final peak is going to be decided by the price - how much can we afford to pay?", Dr. Miller told me in an interview about his work. "If we can afford to pay $150 per barrel, we could certainly produce more given a few years of lead time for new developments, but it would break economies again."

Miller argues that for all intents and purposes, peak oil has arrived as conditions are such that despite volatility, prices can never return to pre-2004 levels:

"The oil price has risen almost continuously since 2004 to date, starting at $30. There was a great spike to $150 and then a collapse in 2008/2009, but it has since climbed to $110 and held there. The price rise brought a lot of new exploration and development, but these new fields have not actually increased production by very much, due to the decline of older fields. This is compatible with the idea that we are pretty much at peak today. This recession is what peak feels like."

Although he is dismissive of shale oil and gas' capacity to prevent a peak and subsequent long decline in global oil production, Miller recognises that there is still some leeway that could bring significant, if temporary dividends for US economic growth - though only as "a relatively short-lived phenomenon":

"We're like a cage of lab rats that have eaten all the cornflakes and discovered that you can eat the cardboard packets too. Yes, we can, but... Tight oil may reach 5 or even 6 million b/d in the US, which will hugely help the US economy, along with shale gas. Shale resources, though, are inappropriate for more densely populated countries like the UK, because the industrialisation of the countryside affects far more people (with far less access to alternative natural space), and the economic benefits are spread more thinly across more people. Tight oil production in the US is likely to peak before 2020. There absolutely will not be enough tight oil production to replace the US' current 9 million b/d of imports."

In turn, by prolonging global economic recession, high oil prices may reduce demand. Peak demand in turn may maintain a longer undulating oil production plateau:

"We are probably in peak oil today, or at least in the foot-hills. Production could rise a little for a few years yet, but not sufficiently to bring the price down; alternatively, continuous recession in much of the world may keep demand essentially flat for years at the $110/bbl price we have today. But we can't grow the supply at average past rates of about 1.5% per year at today's prices."

The fundamental dependence of global economic growth on cheap oil supplies suggests that as we continue into the age of expensive oil and gas, without appropriate efforts to mitigate the impacts and transition to a new energy system, the world faces a future of economic and geopolitical turbulence:

"In the US, high oil prices correlate with recessions, although not all recessions correlate with high oil prices. It does not prove causation, but it is highly likely that when the US pays more than 4% of its GDP for oil, or more than 10% of GDP for primary energy, the economy declines as money is sucked into buying fuel instead of other goods and services... A shortage of oil will affect everything in the economy. I expect more famine, more drought, more resource wars and a steady inflation in the energy cost of all commodities."

journal special edition by professor David J. Murphy of Northern Illinois University, an expert in the role of energy in economic growth, the energy return on investment (EROI) for global oil and gas production - the amount of energy produced compared to the amount of energy invested to get, deliver and use that energy - is roughly 15 and declining. For the US, EROI of oil and gas production is 11 and declining; and for unconventional oil and biofuels is largely less than 10. The problem is that as EROI decreases, energy prices increase. Thus, Murphy concludes:

"... the minimum oil price needed to increase the oil supply in the near term is at levels consistent with levels that have induced past economic recessions. From these points, I conclude that, as the EROI of the average barrel of oil declines, long-term economic growth will become harder to achieve and come at an increasingly higher financial, energetic and environmental cost."

Current EROI in the US, Miller said, is simply "not enough to support the US infrastructure, even if America was self-sufficient, without raising production even further than current consumption."

In their introduction to their collection of papers in the Royal Society journal, Miller and Sorrell point out that "most authors" in the special edition "accept that conventional oil resources are at an advanced stage of depletion and that liquid fuels will become more expensive and increasingly scarce." The shale revolution can provide only "short-term relief", but is otherwise "unlikely to make a significant difference in the longer term."

They call for a "coordinated response" to this challenge to mitigate the impact, including "far-reaching changes in global transport systems." While "climate-friendly solutions to 'peak oil' are available" they caution, these will be neither "easy" nor "quick", and imply a model of economic development that accepts lower levels of consumption and mobility.

In his interview with me, Richard Miller was particularly critical of the UK government's policies, including abandoning large-scale wind farm projects, the reduction of feed-in tariffs for renewable energy, and support for shale gas. "The government will do anything for the short-term economic bounce," he said, "but the consequence will be that the UK is tied more tightly to an oil-based future, and we will pay dearly for it."

[OTRAN] Everything that is wrong about highway travel forecasts in one chart

The nation's highway planners are in complete denial about the declining demand for car travel in the US. Nothing shows this better than a chart released by the State Sustainable Transportation Institute earlier this month. Even though vehicle miles traveled have flat-lined for a decade, official DOT forecasts continue to predict un-relenting growth, real soon now. The forecasts made in 1999 missed the US total travel by 22 percent--about three-quarters of a trillion miles. And the latest forecasts predict the same growth rate as the old ones--starting next year. And over-forecasting isn't a fluke--or the fault of the recession--SSTI reports that the DOT forecasts have over-estimated VMT growth 61 times in the past 61 years.http://www.ssti.us/2013/12/new-travel-demand-projections-are-due-from-u-s-dot-will-they-be-accurate-this-time/There's a technical name for this in forecasting: the hockey stick--flat at the bottom left (past), and then rising sharply at the right (future). The DOT projections are a row of hockey sticks, year-after-year.This would be an amusing aside, if these numbers weren't being used to justify hundreds of millions (and billions) of dollars in largely un-needed investments in highways, including blunders like the Columbia River Crossing. Where, oh where, are the reality-based highway planners?

BILL MOYERS: We are so close to losing our democracy to the mercenary class, it's as if we are leaning way over the rim of the Grand Canyon and all that's needed is a swift kick in the pants. Look out below.

The predators in Washington are only this far from monopoly control of our government. They have bought the political system, lock, stock and pork barrel, making change from within impossible. That's the real joke.

Sometimes I long for the wit of a Jon Stewart or Stephen Colbert. They treat this town as burlesque, and with satire and parody show it the disrespect it deserves. We laugh, and punch each other on the arm, and tweet that the rascals got their just dessert. Still, the last laugh always seems to go to the boldface names that populate this town. To them belong the spoils of a looted city. They get the tax breaks, the loopholes, the contracts, the payoffs.

They fix the system so multimillionaire hedge fund managers and private equity tycoons pay less of a tax rate on their income than school teachers, police and fire fighters, secretaries and janitors. They give subsidies to rich corporate farms and cut food stamps for working people facing hunger. They remove oversight of the wall street casinos, bail out the bankers who torpedo the economy, fight the modest reforms of Dodd-Frank, prolong tax havens for multinationals, and stick it to consumers while rewarding corporations.

We pay. We pay at the grocery store. We pay at the gas pump. We pay the taxes they write off. Our low-wage workers pay with sweat and deprivation because this town – aloof, self-obsessed, bought off and doing very well, thank you – feels no pain.

The journalists who could tell us these things rarely do – and some, never. They aren't blind, simply bedazzled. Watch the evening news – any evening news – or the Sunday talk shows. Listen to the chit-chat of the early risers on morning TV -- and ask yourself if you are learning anything about how this town actually works.

William Greider, one of our craft's finest reporters, fierce and unbought, despite a long life in Washington once said that no one can hope to understand what is driving political behavior without asking the kind of gut-level questions politicians ask themselves in private: "Who are the winners in this matter and who are the losers? Who gets the money and who has to pay? Who must be heard on this question and who can be safely ignored?"

Perhaps they don't ask these questions because they fear banishment from the parties and perks, from the access that passes as seduction in this town.

Or perhaps they do not tell us these things because they fear that if the system were exposed for what it is, outraged citizens would descend on this town, and tear it apart with their bare hands.

As an advisory board member for Oregonians for Alternatives to the Death Penalty (OADP.org), I was asked to highlight my most important reason to oppose the death penalty. Here is my response:

"A system committed to having a death penalty is a system that forces the state to pretend to have attained a standard of perfection and fairness that is absurdly far from the reality of the legal system in America today. Thus, having death in the system freezes everything because, if our system is so good today that it can be just to kill people with it, then it needs no improvement--and, in fact, all improvements in procedure and research into sources of error only call into question the claim to existing perfection, and thus the moral claim for the existing death sentences and past executions. And that means that having death locks us into a terribly flawed system that actively resists evidence of systematic errors and necessary improvements. And it turns what should be a quest for justice into a war to justify the status quo against all evidence of its many failings."

Saturday, December 21, 2013

Seven Ripoffs That Capitalists Would Like to Keep out of the Media

What capitalism likes to keep quiet about itself would fill a book... or an evening news hour. (File)Tax-avoiding, consumer-exploiting big business leaders are largely responsible for these abuses. Congress just lets it happen. Corporate heads and members of Congress seem incapable of relating to the people that are being victimized, and the mainstream media seems to have lost the ability to express the views of lower-income Americans.

1. Corporations Profit from Food Stamps

It's odd to think about billion-dollar financial institutions objecting to cuts in the SNAP program, but some of them are administrators of the program, collecting fees from a benefit meant for children and other needy Americans, and enjoying subsidies of state tax money for services that could be performed by the states themselves. They want more people on food stamps, not less. Three corporations have cornered the market: JP Morgan, Xerox, and eFunds Corp.

According to a JP Morgan spokesman, the food stamp program "is a very important business to JP Morgan. It's an important business in terms of its size and scale...The good news from JP Morgan's perspective is the infrastructure that we built has been able to cope with that increase in volume.."

2. Crash the Economy, Get Your Money Back. Die with a Student Loan, Stay in Debt.

The financial industry has manipulated the bankruptcy laws to ensure that high-risk derivatives, which devastated the market in 2008, have FIRST CLAIM over savings deposit insurance, pension funds, and everything else.

But the same banker-friendly "bankruptcy reform" has ensured that college graduates keep their student loans till they die. And sometimes even after that, as the debt is transfered to their parents.

3. Almost 70% of Corporations Are Not Required to Pay ANY Federal Taxes

And that's even before tax avoidance kicks in. The 'nontaxable' designation exempts 69% of U.S. corporations from taxes, thus sparing them the expense of hiring tax lawyers to contrive tax avoidance strategies.

The Wall Street Journal states, "The percentage of U.S. corporations organized as nontaxable businesses has grown from about 24% in 1986 to about 69% as of 2008, according to the latest-available Internal Revenue Service data. The percentage of all firms is far higher when partnerships and sole proprietors are included."

In recent years the businesses taking advantage of the exemption include law firms, hedge funds, real estate partnerships, venture capital firms, and investment banks.

4. Lotteries Pay for Corporate Tax Avoidance

This means revenue comes from the poorest residents of a community rather than from billion-dollar corporations. Many of the lottery players don't realize how bad the odds are. Fill out $2 tickets for 12 hours a day for 50 years and you'll have half a chance of winning.

Some astonishing facts reveal the extent of the problem. Low-income households spend anywhere from five to nine percent of their earnings on lotteries. A Pennsylvania survey found that nearly half of low-income residents planned to gamble at a newly-opened casino. America's gambling losses in 2007 were nine times greater than just 25 years before.

5. The National Football League Pays No Federal Taxes

One of the most profitable organizations in America, with billions in tickets, TV rights, and merchandise sales, and with an NFL Commissioner who earned more money than the CEOs of Wal-Mart, Coca-Cola, and AT&T, is considered a non-profit. It has a tax-exempt status.

It gets even worse. While the individual teams themselves are not exempt from federal taxes, they enjoy multi-million-dollar subsidies from their states for new and refurbished stadiums. Fans - and non-fans - of the Washington Redskins, the Cincinnati Bengals, the Minnesota Vikings, the Seattle Seahawks, the San Francisco 49ers, and the Pittsburgh Steelers are among those who pay taxes for their hometown football fields. New Orleans taxpayers paid for leather stadium seats. For the Dallas Cowboys, a $6 million property tax bill was waived.

A Harvard University urban planning study determined that 70 percent of the capital cost of NFL stadiums has been provided by taxpayers, rather than by NFL owners.

6. Live on Park Avenue, Get a Farm Subsidy

A disturbing but fascinating report called "Farm Subsidies and the Big Dogs" lists Washington, DC, Chicago, and New York City, in that order, as the worst offenders.

In New York, "Many entities receive the federal subsidies at their downtown office buildings, such as 30 Rockefeller Plaza, or at their million dollar residential condos."

In Chicago, "Nearly every neighborhood in the city receives federal farm subsidy payments - including the Gold Coast, Downtown-Loop, Lincoln Park, and even the President's neighbors in Hyde Park."

In Washington, "Even U.S. Senators are receiving farm subsidy checks."

Perhaps more of us should become farmers. In Florida, according to Forbes, "anyone could legally qualify their land as farmland by stocking it with a few cows." Wealthy heir Mark Rockefeller received $342,000 to NOT farm, to allow his Idaho land to return to its natural state.

7. Profit Margin Magic: Turning a dollar into $100,000

Which costs the consumer more, printer ink or bottled water? Calculations by DataGenetics reveal that the ink in a $16.99 cartridge comes to almost $3,400 per gallon. The cost of a gallon of cartridge ink would buy enough gasoline to run the average car for over two years.

Water seems to cost less, until the details are factored in: we're paying for our own public water, which we've given away almost for free, and which comes back to us in no better condition than when it started.

For every 100,000 bottles sold, Nestle pays the proceeds from ONE bottle to those of us (the taxpayers) who own the water.

So This Is Capitalism..

Consumer-exploiting, tax-avoiding, profit-maximizing, responsibility-shirking, winner-take-all capitalism. An economic system which, as Milton Friedman once believed, "distributes the fruits of economic progress among all people."

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

Dear Leopold, Rest In Hell

I first read Heart of Darkness nearly a decade ago. And one quote has stuck with me ever since: "The conquest of the earth, which mostly means the taking it away from those who have a different complexion or slightly flatter noses than ourselves[white folk], is not a pretty thing when you look into it too much." It is a powerful line because of its straight up simplicity. But I am the great-grandson of sharecroppers from Egypt, MS and the great-great-grandson of slaves. My ancestors were shuffled here from Angola, where their former lands were captured by white Europeans. And yet, it pains me to admit, I never fully understood the absolute horror of European colonialism until I read Conrad's classic.

Today is the 104th anniversary of the death of Belgium's King Leopold II. The book made me loathe this greedy man who was, like many Kings of his era, a spoiled, insecure and violent maniac. Belgium, unlike its neighbors, didn't control many colonies. Of course, Leopold thought, how could a country be influential if it didn't have darker peoples under its boot (It should be noted, however, that Leopold's invasion of the Congo started off as a personal investment, which makes it even more heinous). The despot's nefarious forces, dubbed the Force Publique, invaded the Congo Free State and unleashed a horror many of us can't even fathom. The invaders raped Congolese women, destroyed homes and villages, sucked vital resources rubber and ivory) from the country and, more infamously as shown above, cut off the hands of native peoples to intimidate those who didn't produce enough rubber to meet the quota or to show military superiors that bullets hadn't been wasted on, gasp--wait for it, animals. Those beautiful black hands, by the way, are still a presence in Belgium. I was in Brussels several years ago and a candy shop, near the European Commission's headquarters, was selling chocolate hands. No other customer seemed to recognize the odious irony of it all. But, then again, that's Europe for you: a lovely and historically rich continent spectacularly ignorant of its role in multiple genocides.

Leopold was truly an evil man who enriched himself by murdering some 10 million people. Most Belgians are, amazingly, unaware of his crimes. Instead, they see him as the longest reigning monarch in the country's history who helped build things. Belgium is indeed a beautiful country, but whatever Leopold built there was constructed on the bloodied backs of millions of black people who were slaughtered or maimed by his "rubber regime". The the only good to come from Leopold's unfortunate birth was its role in spawning the first global humanitarian cause, a campaign formed to combat his actions in the Congo.

Ultimately, we should always remember the day Leopold gave us the pleasure of leaving this planet. And while I rarely, if ever, celebrate the demise of another human being, that bastard made himself an exception. He was a brutal monster who illustrated the evils of colonialism and white supremacy better than any creature I can imagine. We hear and learn, rightfully, about the Holocaust and the millions of Jews sent to their deaths by Nazism; but seldom are we made aware of the millions of Congolese lives lost to Leopold's terrorism.

So let us celebrate this December 17th and the expiration of a dreadful man whose bloody stamp on history we sadly forget.

Tuesday, December 17, 2013

(Thanks to generous donors in this area, Chess for Success started up in Salem this year at Washington Elementary. Click on the link to add your support.)

Dear Chess Supporters,

I am writing you today with great news! Thanks to you, this year Chess for Success was able to expand to 75 schools and is changing the lives of over 3,100 children. Your donations allow us to help children who are living in poverty develop the skills that they need to be successful and rise above their circumstances. By teaching children critical thinking, determination, strategy and patience we are giving them the tools they need to tackle any obstacle. Chess teaches these skills, chess gives children living in poverty the power to dream big. Don’t just take my word for it; listen to what one of our coaches says:

“Knowing how to play a “smart” game boosts their confidence. Many get a chance to use logic, planning, etc., and become more complex thinkers. I love when they work out their own strategies and find success.” –CFS Coach

Thank you for recognizing the importance of education and the power of chess. You are helping us achieve our mission and we could not do it without you.

A $10 donation buys a chess set for a childA $25 donation provides a month of chess instructionA $50 donation provides 3 chess books to the school libraryA $150 donation sponsors a child for an entire year

LOVESalem

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WORD

Communities exist for the health and enjoyment of those who live in them,

not for the convenience of those who drive through them, fly over them, or exploit their real estate for profit.

-- Ted Roszak, "Where the Wasteland Ends"

"Because we don't think about future generations, they will never forget us." (Henrik Tikkanen)

"Forget the damned motor car and build the cities for lovers and friends." (Lewis Mumford)Let's live on the planet as if we intend to stay

If you are thinking a year ahead, plant seeds. If you are thinking 10 years ahead, plant a tree. If you are thinking 100 years ahead, educate the people.Heroes are not giant statues framed against a red sky. They are people who say: This is my community, and it’s my responsibility to make it better. (Gov. Tom McCall)

Why This Blog?

Jan 19, 2008: LOVESalem reaches the web, bringing a vitally needed message to Oregon's capital city: We must Oregon-ize to put the needs of people before the needs of cars. This requires that we live our environmental values -- that we LOVE (Live Our Values Environmentally) Salem -- by working to stop the Sprawl Machine.

The Sprawl Machine is a ravenous beast that feeds on green space, close-in neighborhoods, and property taxes and that excretes monstrous, ugly road projects that pollute the air, increase mortality and morbidity, promote climate change, weaken families and neighborhoods, and help weaken the social fabric and civic participation.

The Sprawl Machine works by constantly luring its prey with promises that the problems created by cars can be addressed by doing more of the same -- building more lanes, more bridges, consuming ever more money. In other words, the Sprawl Machine promises that we can keep doing the same thing over and over, while expecting a different result this time.

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